IMPORTANT POINTS
Assessee is entitled for filing a claim for refund on the basis of credit notes raised by him towards turnover discount.
Assessee is entitled to claim deduction on paying duty. If he passes on the burden of burden to buyers, he would not be entitled to claim refund. Allowing refund in such a case would result in unjust enrichment of the assessee.
Refund to be made to an applicant should be relatable only to the duty of excise paid by the manufacturer, the buyer and a class of applicants notified by the Central Government.
Term buyer cannot be restricted to the first buyer from the manufacturer. Revenue should attempt to identify the buyer who actually bore the burden of the excise duty. Failing identification, the refund amount should remain in the Consumer Welfare fund.

Headnote:(a) Central Excise Act, 1944 – Section 11-B, 12-A and 12-B – Turnover discount is an admissible deduction – Trade discounts cannot be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price – Trade discounts are known to the dealer beforehand even at the time of clearance – Assessee is entitled for filing a claim for refund on the basis of credit notes raised by him towards turnover discount. (Para 14)
       (1997) 5 SCC 763; (1984) 1 SCC 467; (2005) 3 SCC 787 – Relied upon
       (2012) 4 SCC 618 – Referred
       (b) Central Excise Act, 1944 – Section 11-B, 12-A and 12-B – Unjust enrichment – Assessee entitled to claim deduction on paying duty – Passing on the burden to buyers – Not entitled to claim refund – Allowing refund would result in unjust enrichment of the assessee. (Para 16)
       (1997) 5 SCC 536 – Relied upon
       (c) Central Excise Act, 1944 – Section 11-B(2), Proviso Clauses (d), (e) and (f) – Refund – Amount of excise duty claimed as refund must have been paid by claimant, and, the incidence of such duty must not have been passed on to any other person – Refund to be made to an applicant should be relatable only to the duty of excise paid by the manufacturer, the buyer and a class of applicants notified by the Central Government. (Para 19)
       (d) Section 11-B (2), Proviso Clause (e) – Buyer – Term cannot be restricted to the first buyer from manufacturer – Revenue should attempt to identify the buyer who actually bore the burden of the excise duty – Failing identification the refund amount should remain in the fund. (Para 21)
       Facts of the case:
       The respondent in the above appeal is a manufacturer of cutting tools. The respondent-Assessee filed a refund claim for Rs. 40,22,133/- on 19.07.1988 and a supplementary refund claim for Rs. 5,44,688/-on 15.06.1989 towards excise duty paid on various taxes and discounts such as turnover tax, surcharge, additional sales discounts, transitory insurance, excise discounts, additional discounts and turnover discounts. The said claim was later on revised to Rs. 40,37,938/-on 17.08.1988.
       The Department was of the opinion that the refund towards turnover discount and additional discount was to be rejected as the Assessee was not eligible for deduction from the wholesale price for determination of value.
       On 23.08.1989 a notice was issued to the respondent to show cause as to why the refund claim involving turnover discount and additional discount should not be rejected. After hearing the Assessee, the Assistant Collector by an order dated 06.12.1989 rejected the refund claim amounting to Rs.26,37,462/-and Rs.17,17,808/-in respect of turnover discount and additional discount respectively on the ground that the quantum of discount become known only at the year end. The Collector of Central Excise Appeals set aside the said order dated 06.12.1989 of the Assistant Collector and held that the Assessee was entitled to refund.
       The Assistant Collector passed an Order-in-Original dated 27.10.1992 holding that the Assessee is entitled for the refund claimed by him. The Collector of Central Excise by Order-in-Appeal dated 20.10.1993 rejected the appeal filed by the Revenue and upheld the order dated 27.10.1992 of the Assistant Collector of Central Excise.
       The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), South Zone Bench of Madras allowed the appeal filed by the Revenue against the order dated 20.10.1993 of the Collector of Central Excise. The Tribunal held that the Assessee would be entitled to grant of refund only if he had not passed on the duty burden to his buyers. It was also held that the buyer in turn, would be entitled to claim refund only if he has not passed on the incidence of duty to any other person. It was further held by the Tribunal that the event which gives rise to cause of action for refund is payment of duty made in respect of goods cleared from the factory and once the duty burden has been passed on to the buyer at the time of clearance, issuance of credit note at a later point of time would not entitle the Assessee to claim any refund. The Tribunal also held that burden of duty is normally passed by the manufacturer and the dealer to the ultimate consumer.
       The High Court of Madras answered the reference in favour of the Assessee.
       Finding of the Court:
       If the Assessee has not passed on the burden of duty to anybody else, it would be entitled to refund.
       Result: Civil Appeal Nos. 7906 of 2002 and 14689 of 2015 are allowed. Civil Appeals arising out of Special Leave Petition (C) Nos. 18426 of 2015, 18423 of 2015, 18425 of 2015, 23722 of 2015, 12282 of 2016, 16142 of 2016, 16141 of 2016 and 25055 of 2009 are also allowed in terms of the judgment in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009 is dismissed.

JUDGMENT :

L. NAGESWARA RAO, J.

The above Appeals have been listed before us because of an order dated 16.07.2008, by which there was a reference to a Larger Bench in view of the importance of the questions involved.

2. Civil Appeal No. 7906 of 2002 arises from the judgment dated 23.11.2000 passed by the Madras High Court in R.C. No. 01 of 1999. Civil Appeal No. 14689 of 2015 was filed by the Revenue against the judgment dated 26.11.2014 in Central Excise Appeal No. 21 of 2009. Special Leave Petition (C) Nos. 18426 of 2015, 18423 of 2015, 18425 of 2015, 23722 of 2015, 12282 of 2016, 16142 of 2016 and 16141 of 2016 are filed against the judgment of the Andhra Pradesh High Court in Central Excise Appeal Nos. 21 of 2005, 9 of 2005, 51 of 2004, 10 of 2005, 44 of 2004, 38 of 2004 and 18 of 2005 respectively.

3. Civil Appeal No. 8488 of 2009 is filed against the judgment dated 20.08.2008 passed by the Bombay High Court in Central Excise Appeal No. 100 of 2008 and Special Leave Petition (C) No. 25055 of 2009 is filed by the Union of India against the judgment dated 26.11.2008 of the High Court of Rajasthan at Jodhpur in D.B. Central Excise Appeal No. 34 of 2007.

4. Civil Appeal No. 7906 of 2002 will be taken as the lead matter as SLP (C) Nos. 18426, 23722, 18425, 18423 of 2015 and 12282, 16141 and 16142 of 2016 and Civil Appeal No. 14689 of 2015 were disposed of by the Andhra Pradesh High Court by following the Madras High Court’s impugned judgment in Civil Appeal No. 7906 of 2002. Civil Appeal No. 8488 of 2009 and SLP No. 25055 of 2009 will be dealt with separately as the facts and the point involved are slightly different.

Civil Appeal No. 7906 of 2002

5. The respondent in the above appeal is a manufacturer of cutting tools. The respondent-Assessee filed a refund claim for Rs. 40,22,133/- on 19.07.1988 and a supplementary refund claim for Rs. 5,44,688/-on 15.06.1989 towards excise duty paid on various taxes and discounts such as turnover tax, surcharge, additional sales discounts, transitory insurance, excise discounts, additional discounts and turnover discounts. The said claim was later on revised to Rs. 40,37,938/-on 17.08.1988. The claim of the Assessee was that the said amount was deductable from the excise duty. The Department was of the opinion that the refund towards turnover discount and additional discount was to be rejected as the Assessee was not eligible for deduction from the wholesale price for determination of value under Section 4 of the Central Excises & Salt Act, 1944. On 23.08.1989 a notice was issued to the respondent to show cause as to why the refund claim involving turnover discount and additional discount should not be rejected. After hearing the Assessee, the Assistant Collector by an order dated 06.12.1989 rejected the refund claim amounting to Rs.26,37,462/-and Rs.17,17,808/-in respect of turnover discount and additional discount respectively on the ground that the quantum of discount become known only at the year end. The Collector of Central Excise Appeals set aside the said order dated 06.12.1989 of the Assistant Collector by his order in appeal dated 21.02.1990 and held that the Assessee was entitled to refund.

6. As per the amendment made to Section 11-B of the Central Excise Act, 1944, (hereinafter referred to as “the Act”) an application filed for refund prior to the Central Excises & Customs Laws (Amendment) Act 1991 shall be deemed to have been made under the Amendment Act and considered accordingly. The Assistant Collector of Excise issued a show cause notice dated 13.02.1992, directing the Assessee to produce evidence in support of the refund claim. It was mentioned in the said notice that the burden of proof to show that the full incidence of duty has not passed on to the buyers is on the Assessee as per Section 12-B of the Act.

7. The Assistant Collector passed an Order-in-Original dated 27.10.1992 holding that the Assessee is entitled for the refund claimed by him. The Collector of Central E

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2016 Supreme(SC) 673

Cases Referred (5)